India-UK FTA: Major Breakthrough as 85% of Steel Exports Escape UK Curbs

The long-standing deadlock regarding steel trade in the India-UK Free Trade Agreement (FTA) has finally been resolved, providing a massive boost to Indian exporters. Through strategic negotiations, India has successfully ensured that the vast majority of its steel shipments will remain shielded from Britain's upcoming restrictive safeguard measures.

Resolving the Steel Safeguard Deadlock

The proposed UK steel safeguard regime was one of the most significant hurdles in finalizing the Comprehensive Economic and Trade Agreement (CETA). As the UK prepares to operationalise the pact on July 15, the recent consensus marks a landmark achievement for bilateral trade. Under the new framework, the UK is set to implement a regime on July 1, 2026, which will cap tariff-free steel imports and reduce overall quota volumes by 60% compared to previous mechanisms. Any imports exceeding these quotas will face a steep 50% tariff.

To prevent Indian industries from bearing the brunt of these restrictions, the two nations have agreed on a sophisticated protection mechanism. India’s interests are being secured through a combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This strategic mix ensures that 85% of India's outbound steel exports to the UK will remain outside the scope of the new restrictive measures.

High Stakes for Indian Metal Exporters

The resolution comes at a critical time for the Indian metallurgy sector. In the 2025-26 fiscal year, India's exports of iron, steel, and related products to the UK were valued at approximately USD 893.4 million. By shielding 85% of these shipments, the agreement minimizes market disruptions and maintains a balanced trading environment for Indian manufacturers.

The breakthrough follows high-level diplomatic discussions, including meetings between India’s Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle. These negotiations were essential to protect commercial interests before the UK's tighter limits on products manufactured within its own borders take effect.

The Looming Challenge of Carbon Taxes

While the steel quota issue has been settled, a new challenge is emerging on the horizon: the UK's Import Carbon Pricing Mechanism. Scheduled to come into force in 2027, this framework mirrors the European Union's Carbon Border Adjustment Mechanism (CBAM).

According to the Global Trade Research Initiative (GTRI), India faces significant exposure here, with exports worth roughly USD 775 million at risk. The carbon tax will target carbon-intensive sectors including iron, steel, aluminium, fertiliser, cement, hydrogen, and glass. Once free allowances under the UK's Emissions Trading Scheme (ETS) are phased out, the tax could impact import values by anywhere between 14% and 24%. Indian exporters will need to focus on decarbonization to remain competitive under this upcoming green trade regime.

Key Takeaways